How Sales Taxes Affect Customer and Firm Behavior: The Role of Search on the Internet

When a multi-channel retailer opens its first retail store in a state, the firm is obligated to collect sales taxes on all Internet and catalog orders shipped to that state. In this paper, we assess how opening a store affects Internet and catalog demand. We analyze purchase behavior among customers who live far from the retail store but who are obligated to pay sales taxes on catalog and Internet purchases. A comparable group of customers in a...